The asset management industry is well-positioned for long-term growth thanks to the expansion of investable assets, increasing disposable income, the growing popularity of passive investments, digitization, and the adoption of advanced technologies.
Given this backdrop, it could be wise to add fundamentally strong asset management stocks Artisan Partners Asset Management Inc. (APAM – Get Rating), Federated Hermes, Inc. (FHI – Get Rating), and SuRo Capital Corp. (SSSS – Get Rating) to one’s portfolio.
Before diving deeper into the fundamentals of these stocks, let’s understand what’s shaping the industry’s prospects.
Last year, asset management companies benefited from the collapse of three regional banks as depositors took out their money from risky banks and invested in instruments yielding better returns. The Dow Jones U.S. Asset Managers Index has risen 7.8% over the past year. The asset management industry is benefiting from the accumulation of savings, growth of wealth and the rise in the number of high-net-worth individuals.
Moreover, a rapidly aging population means there would be increased contributions toward retirement and pension funds. The global assets under management in the wealth management market are forecasted to reach $130.60 trillion in 2024 and grow at a CAGR of 5.9% to reach $155.10 trillion by 2027.
In order to attract a different class of investors, asset managers are diversifying into alternative asset classes. Such diversification is not only helping generate better returns but also reducing the overall risk. Hence, investments are flowing into alternative asset classes, including real estate, private equity, private debt, etc.
Additionally, asset managers are integrating environmental, social, and governance (ESG) investing into their investing processes, helping attract many institutions and individuals who seek to invest in companies or sectors with strong ESG practices.
Furthermore, the asset management industry is set to benefit significantly from the adoption of advanced technologies such as artificial intelligence (AI), machine learning, and big data analytics.
The application of generative AI would help asset managers identify potential risks, assist in decision-making, enhance operational efficiency, provide deeper insights into trends, etc. The use of AI in the asset management market is projected to grow at a CAGR of 24.4% to reach $11.90 billion by 2030.
Considering these conducive trends, let’s assess the fundamentals of…
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